Receiving financial aid can have consequences for LTD claimants

By Tony Poland, LegalMatters Staff • Applying for government assistance may seem like a good idea if you find yourself in financial difficulty waiting for your long-term disability (LTD) claim to be approved but failing to seek advice first could prove costly, says Ontario disability insurance lawyer Courtney Mulqueen.

Mulqueen, principal of Mulqueen Disability Law Professional Corporation, says because LTD claimants are off work, they may not have the resources to pay for such basics as rent and food. Seeking financial aid is one option but she warns any assistance received could affect an insurance claim.

“People struggling without an income for several months and sometimes even years while managing serious medical conditions that often impair their cognition may not understand their eligibility and the impact that those other benefits could have on their LTD claims and their long-term financial situation,” she tells LegalMattersCanada.ca. “There are some government programs available but it is important to know how they work.

“When you have questions, getting the right answer early can go a long way to ensure you are not jeopardizing your claim or causing any sort of repayment obligation later.”

Mulqueen says many people who make an LTD claim have short-term disability coverage as part of their workplace insurance to tide them over. When that runs out there are government programs such as Canada Pension Plan disability benefits and EI sickness benefits.

Confusion about what program to assess

However, there can be confusion about what program LTD claimants should be accessing, Mulqueen says.

For example, some people who are off work with a disability may try to claim Employment Insurance benefits, which provides temporary income support, she says.

“But there is a difference between EI and EI sickness benefits that some people do not understand,” she explains. “With regular EI, you have to be available to work and you must attest to that. However, if you are saying that you are ready, willing and able to work, then that is contrary to your LTD claim because obviously if you have a disability, you are unable to work.” 

Another issue she says she encounters is LTD claimants who received the Canada Emergency Response Benefit (CERB). CERB provided financial support to Canadians directly affected by COVID-19. The benefit ended in the fall of 2020.

Mulqueen says there was confusion about who was eligible for the benefit and it could be argued the criteria were not specific enough. For example, those who stopped working because of reasons related to the pandemic or who were eligible for Employment Insurance regular or sickness benefits could access the program. So too could those who did not quit their job voluntarily, she says.

Believed their disability made them more vulnerable to COVID

Some people may have believed that since their disability made them more vulnerable to COVID they couldn’t work, therefore they could legitimately accept the weekly $500 benefit, says Mulqueen. And since they were unable to work because of their disability, they did not quit their job voluntarily, she adds.

“There was undoubtedly some confusion surrounding who was eligible,” Mulqueen says. “People with mental health or chronic fatigue issues may have struggled to comprehend the guidelines and may have been overwhelmed by the uncertainty of their situation. Some applied out of desperation because their LTD claim had been denied and they did not have income for treatment, let alone to meet their day-to-day living expenses.

“Perhaps more safeguards were needed because it was a simple matter of ‘click, click, click’ on the government website and suddenly there was money in their bank account,” she adds. “Now, people who were at such a low point in their lives could afford the medication or the physio they needed.”

Mulqueen says she has clients who tell her that they received CERB either while their LTD was being assessed or while they were waiting for their appeal of a denial to be decided. 

‘Shocked to learn they must repay CERB’

“I understand they were struggling financially but I have to tell them that technically they would not have qualified for CERB if the reason they were not working was due to disability,” she says. “Some of my clients say they were shocked to learn they must repay CERB. However, many cannot afford to do that when they have no income from employment or LTD.”

Another consequence of receiving CERB while awaiting an LTD claim approval is that insurance companies may attempt to claw back benefits, Mulqueen says.

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“LTD insurers may also use the fact that the person received these benefits to attack a person’s credibility,” she says. “In many LTD cases, we are arguing financial distress. Insurance providers counter that the claimant had some money coming in so there really is no claim for hardship. 

“In my view, insurance companies who put very ill people in desperate financial situations by denying their claims should not then use the fact that they applied for other benefits to discredit or disentitle them from benefits.”

The CERB issue has come up in other areas of the law, Mulqueen says, notably in employment litigation. 

There has been conflicting case law across Canada about whether any money received from the benefit is deductible from damages in a wrongful dismissal case.

Not aware of court cases

Mulqueen says she is not aware of any court cases involving CERB and LTD claims but she suspects it is only a matter of time.

“It will have to come up at some point,” she predicts. “However, the majority of LTD cases are not going to trial for the simple reason people cannot wait two or three years to get their day in court. They desperately need financial help to get treatment now so they are taking settlements.

“Going to trial means the stress of litigation as well as not having any sort of income. They would rather take some money now so they can focus on their recovery.” 

Mulqueen says insurers must take a realistic view of the circumstances. In most cities the $2,000 a month that CERB paid may not even be enough to cover rent, she notes, adding there is nothing left over for the treatment of a disability.

Shouldn’t be a reduction in the settlement

She says she sees no problem with asking a claimant to repay a benefit if it was found they were not entitled to it. However, there should not be a reduction from any insurance settlement, says Mulqueen.

The bottom line is that those who are unable to work because of a disability need to be careful when applying for any benefit while waiting for their LTD claim to be decided, she says.

“I do believe that seeking help early when you have questions about something such as available benefits can go a long way in terms of setting yourself up for the future,” Mulqueen says. “Getting advice could help you avoid doing something that could potentially jeopardize your LTD claim or result in any sort of repayment obligation that only adds more stress to your situation.”